Chaos in the Massachusetts Health Care Market

Want a preview of ObamaCare in action? Check out the Massachusetts insurance market—which earlier this week entered a state of "market chaos" after Governor Deval Patrick denied a host of health insurance rate increases.

On Tuesday, the state's individual insurance market effectively shut down as insurers refused to comply with the state's rejection of 235 of 274 proposed health insurance rate increases.

The dispute has already put the two sides in court. Insurance companies are now claiming that the rejected rate increases mean they won't be able to operate at a profit, and arguing that no actuary would approve the sort of rates that state insurance regulators say they expect. Actuary sign-off is not only important for fiscal stability—it's a legal requirement in the state.

Is this just insurance company posturing? It's entirely possible. Industries, entirely understandably, are bound to put up a fight when told they can't set their own prices. That means making the toughest claims they think they can get away with. But it's not unbelievable that the combination of rate caps and increased regulatory burdens is imposing what amounts to an impossible strain on private insurers.

A judge is expected to rule on the dispute by Monday. But given that the Affordable Care Act was sold in part based on the argument that it expands government authority to review insurance rates, I think it's safe to say that this fight is just beginning.